Anglo Pacific’s acquisition of the South32 copper/nickel project portfolio has won approval from several City analysts.
Peel Hunt says it is the cornerstone acquisition it was looking for to replace Kestrel, its Australian coal mining royalty, where revenues are winding down (read more).
Royalties from West Musgrave and Santo Domingo alone should replace Kestrel and help boost APG’s base level contributions as high as US$100min the medium term, said the broker.
The dividend also looks solidly backed at 7p a share post completion of the acquisition, which is expected to be in the second half of this year.
Berenberg, meanwhile adds that this deal removes the risk of revenue tail-off from Kestrel and adds exposure to high-quality future-facing metals to the portfolio.
The company notes that it believes that South32 will be a supportive, long-term shareholder, which is encouraging from an overhang perspective.
“Effectively, this takes the windfall cash that Kestrel is generating – given (i) high coal prices and (ii) the change in the Queensland Royalty regime – and recycles it into an attractive portfolio of long-life royalties in an attractive commodity mix. “
Berenberg has a 450p price target, while Peel Hunt goes for a slightly less bullish 215p.
Shares rose today by 0.7% to 151p.